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Forint continues to recover

Analysis

The forint was trading at 317.60 to the euro late Tuesday on the interbank forex market, up from 319.75 late Monday. At 319.94 to the euro early Tuesday, the forint moved between 316.73, an eight-day high, and 320.23, after hitting an all-time low at 327.62 last Thursday.

The Hungarian currency continued to recover from a plunge last week, related to the Swiss central bank's surprise scrap of its exchange rate cap against the euro, while officials talked the forint up.

It improved against the franc, too, despite the Swiss currency's gains in euro terms. But word from the Swiss finance minister who saw the franc stabilising at a 1.1 level to the euro helped the forint.

The managing director of the National Bank of Hungary (MNB) told a Euromoney conference in Vienna on Tuesday that the MNB was pondering the pros and cons for some local version of quantitative easing to safeguard competitiveness as the ECB was likely to launch easing soon. This suggested to investors that an outright rate cut, as expected as late as early this month, was now out of question.

Meanwhile, Economy Ministry State Secretary Gábor Orbán said at the same conference that the recent weakening of the forint versus the euro was not justified by the country's strong economic fundamentals. He added that neither the extent nor the pace of the forint's recent easing was a cause for concern at this stage.

The Hungarian government sold as much three-month Treasury bills at a regular auction on Tuesday as planned, but with smaller discount and falling yields compared to a week ago, while bid to cover ratio increased to 2.67 from 2.25.

The forint traded at 274.58 to the dollar, up from 275.50 late Monday. On Tuesday, it moved between 273.52 and 276.82, after falling to an all-time low of 280.33 last Thursday.

It was quoted at 313.76 to the Swiss franc, up from 315.62 late Monday. Its range on Tuesday was 312.62, a five-day high, to 315.97, after it plunged to an all-time low at 378.49 last Thursday.

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